The last time Todd Kozel communicated directly with shareholders via an RNS was back in 2012 – Nov 8th to be precise. It’s been almost half a year since the Chairman and CEO has uttered a word. The only time shareholders did hear from him – was when he announced a 1 million share sale in March. The second time was when he announced a 10mln share transfer which was apparently a ‘repayment’ based on some kind of unknown financial transaction.
It’s not surprising that perhaps the noises across the blogs and bulletin boards is that the CEO has lost touch with his loyal and long time enduring private investor base. Based on today’s notification of an AGM to be held in Bermuda – one has to assume that the CEO and Chairman has decided to distance himself further from the pi base.
Last year’s AGM was held in Paris and attended by many devoted shareholders. After many had travelled literally thousands of miles to be at the AGM – most left disappointed as the CEO elected to take all questions from shareholders and denied other board members from being included in the Q&A session. Over protective? Or just keen to ‘manage’ the situation as best a CEO can..?
The backdrop to a great deal of this shareholder discord and the CEO’s overly protective stance stems from the ongoing 3rd party litigation case which ended in March with judgement cited for 90 days at the earliest. Could be June or even July. Looking at past RNS’s – it’s clear that GKP decided it best to keep quiet on the operational front while the CC was underway.
That said – silence was broken by the COO in an operational RNS dated Feb 2oth, 2013.
In that RNS, GKP said the following:
“All equipment modules have now been delivered from Calgary, Canada through the port of Mirsin in Turkey and assembly work on the first Shaikan production facility (PF-1) is nearing completion… Shaikan PF-1 will become operational in March 2013.” END.
“The Company plans to spud Shaikan-10, the first development well, and Shaikan-7, the first deep exploration well, targeting the mid to lower Triassic and, potentially, Permian horizons, by the end of Q1 2013. Shaikan-10 will be drilled with the Weatherford 842 rig and Shaikan-7 with the Weatherford 319 rig.” END.
Nearly 3 months on from the above RNS (that’s 25% of the year by the way) the company announced this today…
“Following approval of the Shaikan FDP, Gulf Keystone will be ready to step up its production operations through the commissioning of two new production facilities at Shaikan (“PF-1 and PF-2″). The Company is planning to complete mechanical assembly and connection works on the Shaikan PF-1 by the end of Q2 2013, which will be followed by a period of start-up, commissioning and ramping-up of production to a target of 20,000 bopd, increasing to a capacity of 40,000 bopd in the coming months following the commissioning of the Shaikan PF-2.” END.
So based on the above – the company appears to have made very little progress on PF-1. Apparently it “will become operational in March 2013″. Nope. That’s not happened. It’s now apparently operational by end of Q2. Considering the assembly work/equipment modules were with the company sometime ago – it’s a wonder what they’ve been doing for the last 3 months?
There are more glaring ‘missed’ or delayed operational issues that could be picked up on but there’s little point in tearing the business apart. Delays happen – it’s the nature of the Oil&Gas business. So it’s fair to cut some slack from time to time. But before we ‘gloss’ over the delays – lets just relook at the above wording again…
Here’s the key paragraph worth noting…
“Following approval of the Shaikan FDP, Gulf Keystone will be ready to step up its production operations through the commissioning of two new production facilities at Shaikan (“PF-1 and PF-2″)” END.
Note the caveat “Following approval of the Shaikan FDP”. Mmm. So there we have it. That’s the reason why the delays are in place. That’s the reason why GKP appear to be twiddling their thumbs and passing 3 months by.
The FDP was apparently submitted to the KRG in January 2013. It’s now May 2013.
But you’ll be hard pushed to find GKP quoting the KRG in this recent RNS. Quite the opposite – they say…”The Company is in constructive talks with the appropriate regulatory authorities concerning their feedback on the proposed way forward for the development of the Shaikan field… and mention a “Shaikan Block Management Committee” as being the decision makers.
So in a nut shell, GKP’s production facilities appear to be held back due to the KRG (sorry – I meant…Shaikan Block Management Committee) deliberating on the FDP.
Shaikan is cited as a major development project. It has the potential to deliver over 30% of the KRG’s near term to medium term production targets. It’s clearly crucial to the KRG’s plans going forwards. The problem for GKP is that they are asset rich but cash poor. GKP simply do not have the funding ability to satisfy even the most straight forward of FDP’s. With no cash flow / production to self fund the project (at present) it makes it pretty hard for all involved to pass the FDP.
Something has to give. Otherwise the FDP approval might not be coming anytime soon.
There’s plenty under way via talks with Turkey which suggests exports might be around the corner. There’s also the CC judgement due soon too. The latter could see 30% of GKP go to another party. Whilst to many that seems very unlikely – I suspect to the KRG or Shaikan Block Management Committee might prefer to await the final judgement before approving an FDP based on GKP owning their current % holding.
There’s no doubt about it – the Court case has done immense damage to GKP, the CEO and Kurdistan progress. Some might say it’s just a dent and the damage will be long forgotten once the CC Judgement is passed and fingers crossed – goes in GKP’s favour. That’s probably true in terms of the bigger picture – but ask any shareholder if they would have preferred settling the case 12months ago for xx million and most would not think for more than a second before giving you an absolute ‘yes’.
If/when the judgement does come in GKP’s favour, it will feel like a victory. But in reality, the battle was lost long ago and there’s plenty of pi’s that have damaged portfolio’s/equity values to testify to that.
There is light at the end of the tunnel though – and that’s the curious thing. GKP are probably closer to having a genuine takeover or farm out deal than ever before in their entire history. If a predator fancies having a dart at GKP – then it’s better now rather than later.
In a few weeks time, GKP could have clean title on all assets, FDP approved and Production underway. And that can happen pretty fast indeed.
On July 1st 2012 – the sp was also near the 140′s level. It took just 3 days before it was testing 224p. When the tide turns – it normally is pretty fast. Incidentally, July 4th 2013 is when GKP are holding a London investor meeting. What’s the betting the shareprice is not far off 2012′s comparable levels by then?
At 132p today – GKP looks a great buy and that’s with all the risks that come with it.
Thesharehub near term share price target is 265p+ for July. That’s 100% above today’s closing price.
2 May 2013
Gulf Keystone Petroleum Ltd. (AIM: GKP)
Gulf Keystone set for Significant Production Growth
Gulf Keystone, a leading independent E&P operator in the Kurdistan Region of Iraq, is pleased to provide an update on its four blocks in the Kurdistan Region of Iraq, including the world class discoveries at Shaikan and Sheikh Adi, as well as Akri-Bijeel and Ber Bahr.
With the Shaikan commercial discovery alone, Gulf Keystone has one of the world’s largest onshore conventional oil & gas developments with a Pmean 13.7 billion barrels of gross oil-in-place as set out by Dynamic Global Advisors, independent Houston-based exploration consultants. A recent report by Goldman Sachs highlights the scale of the Shaikan development and the fact that in 2015 the global production increase will in part come from the Shaikan field*. The Company continues to be highly active with the drill bit, in order to further prove the value of its blocks.
Today Gulf Keystone is on the verge of moving into a phase of significant production, with the capacity to produce up to 40,000 barrels of oil per day (“bopd”) from Shaikan in the coming months and up to 400,000 bopd in the coming years. The Company will be a key contributor in meeting the Kurdistan Regional Government’s oil production targets of 1 million bopd in 2015 and 2 million bopd by 2019.
Considerable progress is being made on the regional pipeline infrastructure development and the Company’s increasing production will be matched by the available export capacity. The size and quality of the Company’s fields is now increasingly recognised and a number of the world’s largest oil companies, including ExxonMobil, Chevron and Total, are now following Gulf Keystone’s lead and commencing active work programmes in the Kurdistan Region of Iraq.
*Goldman Sachs: April 12, 2013 – “380 projects to change the world. From resource constraint to infrastructure constraint”
Commenting on today’s announcement, Todd Kozel, Executive Chairman and CEO, said:
“As one of the first companies to see the potential of the region, over the last five years Gulf Keystone has drilled or participated in nearly 20 wells and remains one of the most active operators in the Kurdistan Region of Iraq. Shaikan is the largest onshore development worldwide today not in the hands of a major operator. However, we believe that we have only scratched the surface of the true value of our blocks and our ongoing exploration and appraisal activity is expected to result in further upside.”
“The Company is encouraged by recent reports from a variety of sources, including political spokespersons, regarding the close and burgeoning ties between the Kurdistan Region of Iraq and Turkey, which the Company believes presents further transformational progress for the region. In this context, Gulf Keystone will play a major role as a co-host of the 2nd International Energy Arena Conference in Erbil on 30 May, a meeting place for key political and industry decision makers on the energy cooperation between the Kurdistan Region of Iraq and Turkey.”
“I therefore strongly believe that there is considerable momentum in the development of Kurdistan’s vast natural resources and Gulf Keystone is in a prime position to benefit as the region moves to this next stage.”
“Our remarkable journey continues and I remain indebted to our hosts in the Kurdistan Regional Government and to the outstanding team within our Company. We have never been more excited about the future.”
Production & Development
– Significant operational progress made in the last 3.5 years between the Shaikan-1 discovery in 2009 and the submission of the Shaikan Field Development Plan (“FDP”) in early 2013, which is currently being reviewed by regulatory authorities
-- Two new production facilities at Shaikan (PF-1 & PF-2) nearing completion
-- 2013 production capacity of 40,000 bopd, expected to increase to 150,000 bopd in 2015
– Gulf Keystone’s ramp up in production fully aligned with the region’s ongoing infrastructure development
– Alternative transport options exist for Gulf Keystone’s crude whilst the Shaikan pipeline is constructed, including the ability to truck and accessing growing pipeline infrastructure, including a planned oil pipeline with initial capacity of 300,000 bopd to the Fishkabur pump station on the border with Turkey expected to complete in 2013
Exploration & Appraisal
– Extensive drilling campaign continues with the Company’s 18th and 19th wells: Shaikan-7 deep exploration well & Shaikan-10 development well to spud in Q2 2013
– Following recent success of the Sheikh Adi-2 well, appraisal drilling is planned for the 1.9 billion barrel Sheikh Adi field (independently audited P50 gross oil-in place estimate), as well as further exploration work on the block
– Extensive exploration and appraisal programme is ongoing on the Akri-Bijeel block with two discoveries, Bijell-1 and Bakrman-1, made to date
– Fully funded for the 2013 work programme and aiming to achieve additional revenues through significant production growth
– The Company will play a major role at the 2nd International Energy Arena Conference co-hosted by The Strategic Technical Economic Research Center (STEAM) and Gulf Keystone. Todd Kozel will participate in the Mapping the Future session led by the Minister of Natural Resources of KRG, H.E Dr. Ashti Hawrami and the Minister of Energy and Natural Resources of Turkey, H.E Taner Yildiz. The Prime Minister of the Kurdistan Regional Government, H.E Nechirvan Barzani, will also be in attendance. The conference will be held in Erbil on 30 May 2013.
Shaikan Field Development Plan
On 27 January 2013, Gulf Keystone, as operator, submitted a Field Development Plan (“FDP”) to the Shaikan Block Management Committee. The Company is in constructive talks with the appropriate regulatory authorities concerning their feedback on the proposed way forward for the development of the Shaikan field, which was declared a major commercial discovery in August 2012.
Shaikan PF-1 and PF-2
Following approval of the Shaikan FDP, Gulf Keystone will be ready to step up its production operations through the commissioning of two new production facilities at Shaikan (“PF-1 and PF-2″). The Company is planning to complete mechanical assembly and connection works on the Shaikan PF-1 by the end of Q2 2013, which will be followed by a period of start-up, commissioning and ramping-up of production to a target of 20,000 bopd, increasing to a capacity of 40,000 bopd in the coming months following the commissioning of the Shaikan PF-2.
Delivery of equipment modules for the Shaikan PF-2 is progressing and the construction of the Shaikan PF-2 site has been completed. The assembly works will commence following the completion of the Shaikan PF-1.
Shaikan-7 and Shaikan-10
The Company plans to spud Shaikan-7, the first deep exploration well, targeting the mid to lower Triassic and, potentially, Permian horizons, and Shaikan-10, the first development well, in May and June 2013 respectively.
Extensive exploration and appraisal programme is ongoing on the Akri-Bijeel block. The Bakrman-1 exploration well testing programme is nearing completion and the Bijell-2 and Bijell-7 wells are being drilled to appraise further the Bijell discovery. The construction of an Extended Well Test facility for the Bijell discovery is nearing completion.
Ber Bahr Block
Re-testing of the Ber Bahr-1 exploration well continues.
Sheikh Adi Appraisal Programme
After making a Jurassic discovery with the Sheikh Adi-2 exploration well in November 2012, the Company and the Kurdistan Regional Government, its partner in the block unanimously agreed to move to an appraisal programme to appraise Jurassic targets and evaluate the Triassic upside at the 3,500 metres projected depth with the Sheikh Adi-3 appraisal well. Furthermore, we plan to target two additional exploration leads, comprising potential extensions of the Atrush and Swara Tika discoveries, following acquisition of 70 km of additional 2D seismic data. The Company is enthusiastic about the forthcoming appraisal and additional exploration work as it is the Company’s belief that the Shaikan field shows signs of a significant extension into the Sheikh Adi block.
Full Year Results, Investor Day & AGM
The Company will announce full year results for the period ended 31 December 2012 on Thursday, 20 June 2013. The Company will hold an Investor Day on Thursday, 4 July 2013 in London. The Company’s Annual General Meeting is to be held on Thursday, 25 July 2013 in Bermuda.